A risk measure (e.g., for a portfolio) which cannot exceed the sum of the measure for the components of the portfolio. This property holds center stage of risk diversification: with diversification, the aggregated risk of a portfolio should not be more than the individual risk of its parts. Subadditive risk measures include volatility (standard deviation), expected shortfall (CVaR), etc. The expected shortfall (ES) is a risk measure that satisfies subadditivity, and provides more accurate information about the tail of the return distribution.

The advantage of a subadditive risk measure is that by combining the individual risks (associated with assets, investments, holdings, etc.), the sum will always overestimate the overall risk for the portfolio. In this sense, a subadditive risk measure provides a conservative estimate of the overall “combined” risk, and the real combined risk would be not exceed this figure.